In part one about taxes I took the time to discuss my views on taxes; Which ones were constitutional in my view and which ones were not. And I am writing this one simultaneously. What is right and what needs to be the way forward are two different discussions in my opinion. So I wanted to keep them separate from one another. That thread for discussion of what taxes are constitutional and this one for what might be a better way to incorporate taxes in the government as I would attempt to run it today. So here goes…
The fix…. well there sure isn’t an easy one is there? Let’s start with the two biggest alternatives that are out there in the public domain right now: The fair tax and the flat tax. Amazingly, I talk to lots of folks who don’t know the difference between the two. So I will give the very quick synopsis and my thoughts on each one”
The fair tax is a proposed replacement to the federal income tax that would be done primarily through retail sales. The fair tax would not eliminate the sales tax you already pay. It is in addition to the sales tax. So if you pay $100 for an item with 5% sales tax for a total of $105, then the fair tax would be a percentage of the entire $105. The “Fair Tax Act” has been formally proposed by John Linder (R, GA) in the House and Saxby Chambliss (R, GA) in the Senate. Under the Fair Tax Act, the rate would be 23% of that $105, payable by you at time of purchase. It basically comes out to you paying roughly 30% sales tax if you looked at it that way.
Under the Act proposed, those families below the poverty level would receive a monthly payment as a type of “pre-bate”. The proposal would eliminate federal income taxes, estate taxes, payroll taxes, and gift taxes. Because this would be a consumption tax, there is no dodging it. No tiers for amount of income would exist. Basically you can control how much federal tax you pay by controlling how much you spend.
This would seem to be the closest to what BF could accept. I know he wouldn’t accept any tax, but at least this one gives him the legal right to choose not to purchase something as opposed to the government just outright stealing it from every paycheck for no other reason but because they live the Obama mantra “Yes We Can”. This tax would lower the burden on the wealthy as a lower percentage of their income is spent regularly, meaning they would be contributing a lower percentage of their income. The middle class might be the victims in this proposal, as they tend to spend more than the poor and that spent income is a higher percentage of gross than the wealthy.
This would alleviate the concerns of illegal aliens paying income taxes, as they would be paying the consumption tax when they purchase goods like anyone else. The proposal on the table would eliminate the IRS, a giant money hole that is ineffective (or extremely effective at keeping us confused and scared, depends on your point of view). The fair tax would be paid on all consumption, including health care, investments, and tuition. I see pros and cons to this idea, but we will save it for the discussions.
The flat tax is a much more basic concept. The flat tax would keep income tax in place and replace the current progressive tax rate with a flat, across the board rate, regardless of income level. This proposal has stalled a bit in recent years. It would do the fair thing of taxing everyone equally. It would also vastly improve the simplicity of the current tax codes if done correctly.
The tough part of the flat tax would be figuring out how it would affect other taxes and tax breaks. Eliminating the progressive income tax means that the rich would not be paying as much as they did previously, and the poor would be probably paying a bit more. That is a downside. The flat tax as proposed would close a lot of loopholes that corporations and the wealthy take advantage of.
So those are the two big ones. My proposal is a little different and simplified since I am also not a tax attorney or one of the great minds of economics. I would probably say that the place to begin is the passage of a new amendment to the Constitution. This amendment would eliminate the 16th amendment which calls for income taxes. That is a start, because then government is not arbitrarily taking our money and then operating with free (and corrupt) reign.
I would then say that if there are taxes that America as a whole believes are necessary, that they come in the form of specific bills that directly related to the prupose of the bill. We want government to do the roads, then we establish a road tax. Want to build a new power grid, then we have a power grid tax. See this way every new tax implemented has to be done on its own bill and debated before Congress.
The big thing for me is that I get all the arguments for the earmarks that we see today. But the Polynesian Nautical Society, if America decides to fund it should be debated alone on the floor I propose that Congress cannot pass a bill that does not stand on it’s own. Government can make up any tax that they think the people want. But the bill would be passed on its merits, not tucked neatly in the 8 page stimulus bill.
I know that there are a lot of questions as to how this would impact other aspects of government. I have heard the cries of those who believe that this would cripple Congress’s ability ot function. It would be too many bills, with too much debate, etc. But I also believe that the system I outlined would force Congress to spend money more wisely and would eliminate the ability to tuck some new tax thing in the fine print of the giant spending bills we are seeing today.
So there are my ideas so far. I look forward to everyone’s thoughts on these matters. I don’t have everything figured out in my head quite yet. So pick these ideas apart, especially mine. This is where we are debating what we can do to fix a broken tax system.